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UNITED STATES OF AMEEICA. 



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REV. G^. M. STEELE, D.D. 



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NEW YORK: 
PHILLIPS & H U 

CINCINNATI: 
V\rAl.DeN d- STOWE 

1883. 



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The " Home College Series *^ will contain one hundred short papers on 
a wide range of subjects — biographical, historical, scientific, literary, domes- 
tic, political, and religioui. Indeed, the religious tone will characterize all 
of them. They are written for every body — for all whose leisure is limited, 
but who desire to use the minutes for the enrichment of life. 

These papers contain seeds from the best gardens in all the world of 
human knowledge, and if dropped wisely into good soil, will bring forth 
harvests of beauty and value. 

They are for the young — especially for young people (and older people, 
too) who are out of the schools, who are full of "business" and "cares," 
who are in danger of reading nothing, or of reading a sensational literature 
that is worse than nothing. 

One of these papers a week read over and over, thought and talked about 
at "odd times," will give in one year a vast fund of information, an intel- 
lectual quickening, worth even more than the mere knowledge acquired, a 
taste for solid reading, many hours of simple and wholesome pleasure, and 
ability to talk intelligently and helpfully to one's friends. 

Pastors may organize " Home College " classes, or " Lyceum Reading 
Unions," or "Chautauqua Literary and Scientific Circles," and help the 
young people to read and think and talk and live to worthier purpose. 

A young man may have his own little "college " all by himself, read this 
series of tracts one after the other, (there will soon be one hundred of them 
ready,) examine himself on them by the '• Tl)ought-Outline to Help the Mem- 
ory," and thus gain knowledge, and, what is better, a hve of knowledge. 

And what a young man may do in this respect, a young woman, and boil) 

old men and old women, may do. 

"* J, H. Vincent. 

New Yokk, Jan.^ 18S8. 



Copyright, 1888, by Phillips & Hukx, Now York. 



iomt CoI%t S^ms. jtumbr |tim. 



POLITICAL ECONOMY. 



Definition and Utility of the Subject. 

Social science comprises the statement and explanation 
of the natural laws which govern men in their relations to 
each other. Political economy is the application of that 
portion of those laws which pertains to the production and 
distribution of wealth. Now, we are not to be frightened 
by this term wealth, as thoughthe whole subject were one 
which concerns only rich men, and in which a poor man could 
have no interest. As we shall see when we come to get a 
definition of wealth, the man who has a little property worth 
two or three hundred dollars is just as really a possessor of 
wealth as one who has two or three millions ; and to be able 
to acquire and rightly use these small fortunes is, to the 
aggregate of men, of more importance than the acquisition 
and management of the greater riches of the few. 

For the present it is enough for us to say that wealth com- 
prises all those things which have value. A more complete 
definition will follow by and by. But what do we mean by 
value f This has many forms of definition, but they sub- 
stantially amount to the same thing. The general notion 
concerning it is that it is the ratio in which commodities ma} 
be equitably exchanged for one another ; and this is a cor- 
rect notion. Thus a bushel of wheat may be given for 
two bushels of oats, or a cord of wood for twenty yards of 
cloth. That is, the value of a bushel of wheat is that of two 
bushels of oats. It is thus seen to be a relative term having 
reference to the quantity of one commodity which may be 
equitably exchanged for a given quantity of another. But 



POLITICAL ECONOMT. 



it is im2:)ortant to determine the ground of this relationship. 
A suj^erficial thinker might decide that it was money. But 
money is itself in the same relation to all other commodities 
in this respect as they are to one another, and its value de- 
pends upon the same reason. 

The chief element in value and that which constitutes its 
original standard is the cost of x^oduction ; and by cost is 
meant the amount of labor involved. Labor is the voluntary 
effort put forth by man to secure some desired object. But 
when we say this we are in need of a little caution. We 
are not to infer that the value of an article is estimated by 
the amount of labor required at the time of its production, 
especially if that was a long time ago. The first canoe that 
was made required probably the Lsbor of many months. A 
better one can be made now in a week. But the value of 
the latter is greater than that of the former. It is then the 
labor which would be required to reproduce or replace an 
article which determines its value. 

But there is another element which is essential to value, 
though not determinative of it. This is utility. This com- 
prises all those qualities in objects which make them desirable. 
It will be readily seen that there are objects which have 
utility but have no value. They are such objects as cost 
nothing; that is, such as involve no labor in their production. 
Thus, air and sunshine and rain have no value ; but they 
are of indispensable utility. Value is often in the inverse 
ratio of utility. Iron is a far more useful metal than gold. 
But gold is vastly more valuable than iron.- Still, though 
utility may exist where there is no value, there can.be no 
value where there is no utility ; because no one will make 
any sacrifice for that which is not desirable, and utility is 
only another name for desirableness. 

But valuable things cannot be produced to any consider- 
able extent without tools, implements, and other contriv- 
ances. These constitute capital. CajDital is the result of 



POLITICAL ECONOMY. 



previous labor reserved and employed in further production. 
Xow this implies self-denial. A man cannot consume what 
he has secured by labor and at the same time preserve it to 
use for productive purposes. Hence, he must restrain his 
desires if he would save something for capital. This capital 
is sometimes called pre-existent labor. Here, then, there are 
two elements in the cost of production, namely, effort and 
abstinence^ which two elements we may combine under the 
one term sacrifce. Sacrifice and utility, then, are the two 
great essentials of value, and we may complete our definition 
by saying that value is man's estimate of the amount of sac- 
rifice requisite to the attainment of a desired object. Hence, 
if wealth comprises all valuable objects, and if every desir- 
able object which costs sacrifice has value, then it would be a 
proper definition to say that wealth comprises all those things 
and qualities useful to man, the attainment of which involveji 
sacrifice. This properly includes not only material objects 
and qualities, but also all those human powers acquired by 
sacrifice which enable man to master nature. This is not 
admitted by some writers. But Mr. Carey states a grand 
principle when he says that " wealth is the power to com- 
mand the always gratuitous services of nature." 

From this principle it follows that man is the proper sub- 
ject of Political Economy. The laws pertaining to the un- 
derlying science are found in the nature and character of 
man — in his tastes, his desires, in the motives influencing 
him and the limitation to which he is subject. The results 
to be arrived at are his prosperity and freedom, his mastery 
over nature, and his happiness. Here, then, is the first great 
reason why every person who aspires to any intelligence at 
all should have some acquaintance with this subject. It has 
to do more than any other study with his temporal welfare, 
and with the welfare of society, without the prosperity of 
which his individual prosperity will suffer. 

A second reason is found in the meaning of the terms usc^d. 



POLITICAL ECONOMY 



Economy is from a Greek compound signifying husbandry. 
It lias reference to the prudent management by a househohler 
of his means so as to secure the largest measure of prosperity 
for his family. It does not mean parsimony or even fru- 
gality merely ; that is, it does not consist in mere abstinence 
for the sake of saving. It is rather a wise use of means and 
forces so as to make them as effective as possible. There 
used to be a proverb which said, "There is more in calcula- 
tion than in hard work," and though sometimes perverted in 
the interest of human laziness, it is, nevertheless, full of phi- 
losophy. It is this " calculation " which a study of this kind 
greatly aids. 

Political economy, as the term implies, has i-eference to 
men in society — to the "body politic." Man's greatest 
need is association. The solitary individual is only a 
minute constituent of man in man's relation to the main pur- 
poses of life. No man is complete in himself. He must be 
supplemented by otliers, generally by many others, and find 
a large part of his own competence in this association. Each 
has something that others lack. "We are made to be sources 
of mutual supply. Here emerges another vital fact. 7"^?- 
dividxaliti/ is quite as essential as association. A superficial 
thinker might regard these characteristics as antagonistic. 
But really each is actually dependent on the other. In order 
to association there must be difference, and difference consti- 
tutes individuality. Two farmers raising nothing but wheat 
would have no association in the way of commerce, l^either 
would have any thing that the other wanted. Without dif- 
ferences there can be no association, and without association 
there can be no individual development. 

Here is a potent reason for the study of this subject. It 
is impossible to estimate the power of association merely in 
production. It is known in a minute degree that the com- 
bination of men produces greatly increased results. Yet it 
is hardly realized that a hundred men properly associated 



POLITICAL ECONOMY. 



in an industrial enterprise will effect sometimes a hundred 
and sometimes a thousand times as much as the whole hun- 
dred will working separately. 

Again, this subject intimately concerns man in his govern- 
mental relations. For governments must furnish many of 
the conditions for the best economical results. Then, too, 
the great moral enterprises of the age have to do with the 
knowledge here involved ; education, pauperism, the dan- 
gerous classes, vicious social usages, are to be considered, 
and can only be rightly considered in the light of these 
truths. It is wonderful how intimately connected this is 
with all the great interests of liumanity. Whole communi- 
ties which have been impoverished by a neglect of some of 
the obvious principles of political economy have revived and 
prospered under their application. Portions of our oAvn 
country are examples of both these effects, and that, too, 
within the memory of men now living. 

We shall follow the usual plan of division under the 
heads of Production, Micchange, Distribution, and Con- 
Mon. 



Production. 

Production is the creation of value by rendering the 
utilities of nature available to man. The creation, it will be 
noticed, is not of matter, but of value. There are two great 
agencies which must co-operate in production, nature and 
man. Man furnishes labor. Nature furnishes materials and 
forces. The former Avould be useless without the latter. 
There must be soils, and mines, and trees, and animals, or 
however much labor be put forth, there can be no grain, nor 
fruits, nor meials, nor lumber, nor houses, and no meat, nor 
hides, nor leather. So, also, there may be all kinds of 
material, but without labor they are of no sort of available 
service to man. 

But nature furnishes not only materials but also forces- 



POLITICAL ECONOMY. 



The more obvious of these are wind, the expansive power 
of steam, the explosive property of gunpowder, gravitation, 
especially in falling water, magnetism, electricity, etc. There 
are also the passive properties of matter, such as the mechan- 
ical powers, the lever, inclined-plane, pulley, etc. ; also mal- 
leability, ductility, elasticity, hardness, and the capability of 
taking on an edge for cutting purposes. 

It will thus be seen that labor consists not in creating 
things, but in moving them ; that is, in effecting changes. 
It directs the national forces to the service of men. It can 
move materials into position where these forces can act upon 
them with the desired effect. Labor may move the fuel to 
the fire-place and properly dispose it for kindling. It may 
move a match, which by a previous motion has caught fire, 
to the prepared fuel; but all this would be useless except for 
the conditions and forces which nature furnishes. 

The application of labor to production is of three kinds, 
embraced under the three heads of transmutation, transfor- 
7nation, and transportation. The first comprises changes in 
elements, as when under required conditions elements of the 
soil and of the atmosphere are changed into grain and vege- 
tables and fruit. The second is where there is simply a 
change in the form of the material, as when boards are 
changed into a table, or leather into shoes. The third im- 
plies merely a change of place, as Avhen coal in a mine where 
it has no value becomes valuable by being brought within 
reach of those who want fuel. 

Not all labor applied to production is direct and immediate. 
The larger part is indirect ; in some cases so much so that its 
relation to the product is unseen. For instance, the man 
who makes your shoes is not the only laborer concerned in 
that product. Some one made the leather, some labor pro- 
duced the hides out of which the leather was made ; some 
persons made the tools, some the house or shop, some pro- 
vided susten^ince for the shoemaker. All these are conditions 



POLITICAL ECONOMY. 



without which no shoes can be made, and all who provide 
them furnish a part of the labor on which the product of 
the shoes depends. Of this indirect labor there are several 
classes. 1. Those who provide the materials, and there may 
be many kinds and many groups of these. 2. Those who 
furnish the implements and the machinery. 3. Those who 
supply the sustenance, as also the shelter and raiment of the 
laborer, 4. The government agencies for protecting the 
workman. 5. Organizers and managers of large business en- 
terprises, without whom production would often fall incal- 
culably short of what is now accomplished. 6. The labor of 
raising children who are subsequently to become laborers. 
7. All those engaged in the work of education by which 
men are prepared for more efficient work. This includes not 
only teachers, but writers, clergymen, etc. 8. Professional 
men who devote themselves to matters essential to the inter- 
ests of the community, and thus not only save the time of 
the laborers, but often their property and their health and 
their lives. 9. Inventors and discoverers who ascertain for 
tlie community new conditions of more efficient production. 
These are the principal, though there are also others. 

We have already seen that an essential to any considerable 
production is capital. We have also seen the nature of 
capital and how it comes to exist. We have already inti- 
mated that though capital implies saving, that mere saving 
i.^ not the sole condition of capital. Indeed, it may prevent 
I lie rapid accumulation of capital. The man who has exten- 
: ive grain fields, and who for the sake of saving the expense 
of a reaper or even a cradle, continues to use the sickle, will 
certainly not accumulate capital as he would if he went to 
greater expense. In other words, his saving would be alto- 
gether uneconomical. 

Capital exists in many forms. A man does not need to be 
rich in order to be a capitalist. When the savage has in- 
vented a boAV and arrows, he has the rudiments of capital. 



POLITICAL ECONOMY. 



The laborer who has saved out of his earnings enough to 
buy him a set of tools, or a few acres of soil, is as really a 
capitalist as the owner of factories and railroads. Whatever 
is used in the way of production is capital. Obviously, 
capital by whomsoever owned is an advantage to the laborer. 
For such capital is useless to the owner unless he can unite 
it with labor. And the ability of labor is of no benefit to 
the laborer unless he can employ it in connection with capi- 
tal. Generally the more capital there is in a community, other 
things being equal, the better it is for the laborer ; and the 
more laborers there are, other things being equal, the better 
for the capitalist. There is no antagonism of interests be- 
tween capital and Libor, but rather the utmost harmony and 
entire inter-dependence. Whatever antagonism there is be- 
tween capitalists and laborers, comes from the selfishness of 
the parties concerned. 

As has been intimated, it is only by the application of the 
principles which underlie political economy that men come 
to the conditions of the highest production ; or, in other 
words, find how to satisfy the largest range of desires to the 
greatest extent at the smallest cost of labor. One of the 
chief means of efifecting this is by the combination and 
division of labor. Recalling what was said concerning 
association and individuality Ave shall see what principles are 
involved here, and how naturally they come into operation. 
As there seems to be no antao^onism between the two latter 
notions when carefully analyzed, so there is none, but rather 
the opposite, between combination and division of labor. It 
is true that there are instances where combination may take 
place without division, as when men unite to eflfect purposes 
which one could not accomplish except in much more than 
the proportionate time; as also in some cases to effect pur- 
poses which the individual could not efiect in any length of 
time, such as the moving and placing of heavy timbers and 
stones, the management of ships and railway trains, etc. 



POLITICAL ECONOMY. 



But these are exceptional. For the most part men divide 
their labor in the process in order that they may combine 
the result. For instance, here is some complicated manufact- 
m-e which is divisible into twenty different processes. Now 
there are men each of whom could do every one of these 
parts; but such men are few, and their labor very costly. 
What is wanted is to organize general grades of laborers in 
this work, so that the physically strong and vigorous can 
have the work that none but such can do; the intelligent 
and skillful may have what those less so would be quite unfit 
for; the less strong and less skillful will find employment in 
the lighter and easier parts, and so all grades of ability, 
down to the little child or the delicate woman, and up to the 
most powerful muscle, and the most advanced intelligence, 
can find their place. It is almost incredible how great is 
the increase of productiveness from mere arrangement of 
the workers. This opens a wide field of interestino- and even 
surprising information if we had but space to give it. 

This connects itself with another important condition of 
large production. I mean the diversification of employment 
in a community. It is only in such a varied industry that 
all the varied ability of society can find scope and adaptation, 
and without this production must fall far short of its possi- 
bilities. This is required to develop these differences which 
constitute individuality, on which association depends. 

There are other conditions of enlarged production such as 
are implied in freedom, education, good government, and the 
moral character of the community, the influence of each of 
which will easily suggest itself to thoughtful minds. 

Exchange. 

Exchange is the mutual and voluntary transfer of the 
right of property held by different persons. This implies {a^) 
the existence of the right of property; (6,) that the transfer 



10 POLITICAL ECONOMY. 

must be mutual, otherwise there is no exchange ; (c,) that it 
must be vohmtary, otherwise it would be robbery. 

The principles that form the basis of exchange are the 
same as those implied in the great law of association and 
individuality. They are the same as those which give rise 
to the combination and division of labor. There is usually 
some one kind of labor, and there are never more than a few 
kinds to which any one individual is adapted. But the 
variety of aptitude is as great as the variety of work ; so 
that each may, with little effort in a well-ordered community, 
find his calling. 

But though the individual is thus limited in his productive 
capabilities, his desires and wants are almost limitless. He 
is in need of a thousand commodities only a very few of 
which he produces. He must depend for these on his fellow- 
men. But, on the other hand, he can produce a thousand 
times as much as he needs of those few commodities of 
which he is capable, and which his fellow-men want. Hence 
exchange or commerce. It is implied in the very constitu- 
tion of man. Association is imperative by this very consti- 
tution. 

A distinction is sometimes made between commerce and 
trade — a wise distinction, as it seems to me. The former is 
the object to be accomplished, the exchange of commodities 
of which one has a surplus for those which one needs. The 
latter is the agency through which this is accomplished. 
Thus a farmer has wheat, butter, eggs, poultry, wool, etc., 
which he wishes to exchange for cloth, sugar, agricultural 
implements, boots and shoes, and a hundred other articles. 
He cannot afford to go where these are produced, carrying 
his own products to exchange for those. So arises the neces- 
sity for the trader, the merchant. The great economical 
point to be guarded here is to have no more traders than are 
necessary to make the exchanges. Let commerce be as 
direct as possible. To this end it is desirable that the 



POLITICAL ECONOMY. 11 

greatest number of commodities possible be produced in the 
same community. 

The general law of exchange is value for value. This 
will be seen if we recur to one of our statements concerning 
the nature of value, namely, that it is the quantity of one 
commodity which may be equitably exchanged for a given 
quantity of another. It will be still more clearly seen if we 
recall the complete definition : value is an estimate of the 
sacrifice requisite to secure possession of a desired object. 
Thus, if it requires the labor of one day to produce a pair of 
shoes, and the labor also of a day to produce three bushels 
of oats, then the rule of exchange would be three bushels of 
oats for a pair of shoes, because the labor in the one case is 
precisely equal to that in the other. 

This is the fundamental law, but it is modified in its oper- 
ation by certain other facts and principles. Chief among 
these is the law of supply and demand. By supply is meant 
the quantity of any commodity which is in the market. De- 
mand signifies the quantity which is desired at a given 
price. By price is meant the value estimated in money. 
It is to be observed that supply is not all of the commodity 
that exists, but all that is ottered for sale. And demand is 
not measured by the desire for a commodity, but by desire 
with ability to purchae. A thousand people in a certain 
country town may desire each a diamond necklace ; but 
there is no demand in that town for a thousand diamond 
necklaces, for the reason that not half a dozen persons have 
the^ ability to purchase such an article. 

Now demand and supply affect prices in this way. Sup- 
pose in a certain community which has been exclusively using 
wood for fuel, and that this wood can be had at a certain 
price. After a time a coal mine is discovered in the vicinity 
and coal will then be very much cheaper than wood. This 
would lessen the demand for wood. As there would be the 
same amount for sale as before, the sellers would be in 



12 POLITICAL ECONOMY. 

competition. The price would fall. So if for any reason 
before the discovery of the coal the supply of wood offered 
for sale had been diminished one half, then, the demand being 
the same, the price would rise. Thus we have the general 
principle that, other things being equal, the greater the sup- 
ply the less the price ; the smaller the supply the greater the 
price; the greater the demand the greater the price, and the 
smaller the demand the less the price. But these principles 
again are affected in various ways which we cannot here ex- 
plain. Yet these variations are only temporary, and the 
price or market value always tends, to seek the level of the 
cost of supply. 

We have spoken of trade as an agency of exchange. An 
instrument is also needed. The primitive method of ex- 
change was by barter, that is giving the commodity you 
produce for that which you wish to possess. But this was 
early found inconvenient. The man who makes shoes and 
wishes to exchange them for a coat, might not readily find a 
coat-maker in want of shoes; or, if he should, the latter very 
likely would not want so many pairs of shoes as would be 
equal in value to the coat. So all the exchanges might be at a 
similar disadvantage. What is needed is a commodity which 
will be a medium of exchange, and which every one will be 
willing to receive for any commodity which he has for sale, 
and which will command any thing which he wishes to buy. 
Such an instrument is usually the main element in the ma- 
chinery of exchange. 

Such an instrument, in order to meet the want, must have 
the following characteristics : 1. Yalue in the material of 
which it is made. 2. Uniformity of value throughout the 
world. 3. Much value in small bulk. 4. Approximate con- 
stancy of value. 5. Not readily destructible. 6. Divisibility 
into small portions which are capable of being again united. 
1. Of universal use. 8. Capable of receiving stamps and 
marks. These properties are found in gold and silver, if not 



POLITICAL ECONOMY. 13 

so fully as has been claimed for them, at least to such an ex- 
tent that they have been the basis of the money of the civil- 
ized world. 

But supplementing, and to a certain extent representing, 
these, the instrument of exchange comprises a large credit 
element, consisting of promissory notes, book accounts, bank 
notes, government notes, deposits, checks, drafts, and bills of 
exchange. Banks are institutions to facilitate exchanges by 
transfers of credit, and are a part of the mighty enginery of 
commerce. 

A most interesting topic which might be considered here is 
that of exchanges between nations — the question of foreign 
trade. On this subject the writers and thinkers, as also the 
statesmen and intelligent business men, are radically divided 
in opinion. It is the question of Free Trade and Protection. 
One party believes that there should be no restriction on the 
commerce between nations anymore than between producers 
in the same community. The other party believes that with- 
out some restriction the weaker industries of a nation, when 
put in competition with those of the same kind which are 
stronger in another nation, will be always retarded and gen- 
erally broken down — especially where the latter nation is 
older and has larger capital and longer experience. But for 
larger information the reader is referred to the voluminous 
works on this subject. 

Distribution. 

Distribution has reference to those principles on which the 
proceeds of industry are divided among the parties concerned 
in their production. 

If each man owned all the capital concerned in his business, 
and performed all the labor involved in each product, this 
question would be a very simple one. But when, as in the 
manufacture of chairs, of hardware, of watches, and the build- 
ing of houses, there are many laborers of diverse capabilities, 



14 POLITICAL ECONOMY. 

and especially when we remember that there are many sub- 
sidiary occupations, as in the preparing of materials, in the 
making of tools and machines, in the protection of the work- 
men, in the superintendence and management of the business, 
and in many other ways, the problem becomes a most com- 
plicated one. 

The subject may be divided as follows : 

1. Wages, or the comj^ensation of labor. 

2. Profits, or the compensation to the proprietor or em- 
ployer. 

3. Interest, or compensation for the use of money. 

4. Rent, or compensation for the use of land. 

5. Taxes, or compensation for protection by the Govern- 
ment. 

On the subject of wages diverse and contradictory opin- 
ions prevail. Many of the British economists hold to the 
theory that a very low rate of wages is all that can be main- 
tained, or is on the whole desirable among ordinary unskilled 
laborers. That a man should have compensation sufficient 
to furnish him with such food, raiment, and shelter as are 
essential to keeping him in good working condition ; also in 
addition enough to enable him to maintain a wife, (with 
what she can herself earn,) and to rear, at least, two chil- 
dren prei:>ared to become laborers ; so much is deemed ab- 
solutely essential even to the capitalist, in order that the 
latter's interests do not suffer. Perhaps we should add that 
some additional allowances should be made for possible 
periods of sickness and inability to labor. The school of 
writers referred to profess to find in the human constitution 
a law which prevents Avages from going much beyond this. 
It is said if they do go much higher, the population will 
multiply so rapidly, and the number of laborers will so 
greatly increase, that wages will not only fall back to this 
point, but that great suffering will ensue. 

Most American Avriters repudiate this view, t-hough some 



POLITICAL ECONOMY. 15 

of them seem to hold opinions that logically imply it. Henry 
C Carey has shown that there is not only no such law, but 
that there is another of a diametrically opposite character 
which as thoroughly coincides with as this antagonizes the 
general provisions of an all-wise and beneficent Creator. 
This law, as developed by Mr. Carey, is substantially, that in 
any community where violence is not done to natural prin- 
ciples in the relations between capitalists and laborers, the 
latter are constantly increasing in their share of the joint 
product. While at first the capitalist receives much more 
than half, as time and the development of society go on his 
proportion is constantly diminishing, till* it becomes a small 
fraction of the whole ; while that of the laborer is constantly 
increasing. At the same time the amount received by the 
capitalist is always larger, though the proportion is smaller. 
This law is one of the grandest and most important of the 
recent discoveries in Political Economy. 

Wages depend upon various considerations, such as phys- 
ical ability, agreeableness or disagreeableness of the work, 
greater or less difiiculty and cost of preparation, constancy 
or inconstancy of employment, amount of trust involved, 
social conditions, and state of the Government, etc. 

There is a distinction to be made between nominal and 
real wages. The former is the amount of money received 
for labor. The latter is the amount of useful commodities 
which that money will purchase. Sometimes a dollar a day 
is better compensation than a dollar and a half at other 
times, since in the latter case the dollar and a half may pur- 
chase fewer of the necessaries of life than the dollar in the 
former case. 

There is much more of interest on the subject of wages for 
which we have not space ; but the interested and intelligent 
laborer can find information on them in works on this sub- 
ject. Especially should he try to ascertain the effect of 
even moderate education on individual wages, the sanitary 



16 POLITICAL ECONOMY. 

condition of workers, the real and ultimate influence of 
strikes and trades unions, both good and evil, and the ad- 
vantages and disadvantages of co-operative industry and 
trade, and the great benefit derived from making the laborer 
a sharer in the profits. 

Profits are the share of the product which is assigned to 
the proprietors or employers. They must be large enough at 
least to furnish inducement for them to assume the respon- 
sibility and incur the risk of the business. Obviously no 
one would undertake either of these without larger compen- 
sation than can be claimed by the ordinary labors. Free 
competition will furnish the requisite conditions usually, so 
that these will not become inordinate, though there are ex- 
ceptional instances. 

Interest^ or the compensation paid for the use of money, 
depends upon various considerations. That such compensa- 
tion is proper is obvious from the fact that though ostensibly 
money is the commodity loaned, in most cases it is really 
capital in another form ; and no one denies that when a man 
lends his horse, or his mill, or his farm, he should receive 
something for the use of it. 

The rate of interest is affected by several causes. 1. The 
amount of money in circulation. 2. The amount of other 
capital. 3. The rate of profit, and this depends upon the in- 
dustrial system and the state of the society. As society 
develops the rate diminishes. 4. The security or insecurity 
of capital. 5. The facilities with which the securities can be 
reconverted into money. 6. The promptness and regularity 
of the payment of the interest. On these two last conditions 
rests in part the low rate of interest on government bonds. 

Rent is intimately connected with the value of land, and 
land is the most important instrument and condition of 
wealth. In most countries other than ours the land is prin- 
cipally in the possession of a few owners who let it out to 
other parties for agricultural and other purposes, and receive 



POLITICAL ECONOMY 17 

compensation therefor. The amount of the compensation 
depends in general upon the vahie of the land. For this 
latter reason we may treat the whole question of the value 
of land under the head of rent, though on some other ac- 
counts it should be considered in another place. 

The theory respecting rent which has prevailed in En- 
gland, and largely in this country for most of the present 
century, is that of Ricardo ; and closely connected with it 
is his theory of values. He held that rent arises in this way. 
On the first settling of a new country where there is an 
abundance of more or less fertile land, none of the land has 
any value. Every man takes as much as he wants, selecting, 
of course, the most productive. As population increases the 
best land will in time be all taken up. Then those who 
want land must take up with a poorer quality, or a second 
grade. Now the one who is forced to take this second 
quality would rather pay something for the first quality than 
to have the former for nothing. So when the second grade 
is all exhausted, and the third quality begins to be occupied, 
it becomes more desirable to pay something for the second 
grade than to have the third for nothing. At the same time 
the value of the first grade is increased. It follows from this 
theory, as well as from the several cognate theories of popu- 
lation, etc., that as men multiply and their wants increase, 
the provision for these proportionally diminishes — a most un- 
natural and dismal theory, and altogether contrary to human 
experience. 

A more reasonable, more natural, and far more hopeful 
theory is that developed by Mr. Carey. He declares it alto- 
gether untrue that the most productive lands are first occu- 
pied. On the contrary, in the infancy of society men are 
vv'holly unable to subdue the richer soils. These must wnit 
till society becomes numerous and capable of combination. 
At first only the thinner soils can be cultivated on account 
of the feebleness of the inhabitants. Then as they increase 
3 



18 POLITICAL ECONOMY. 

in numbers and the power of combination the deeper soils 
can be subdued, and, finally, those which are covered with 
gigantic forests, or consist of rich swamps and vast dej^osits 
of vegetable mold. This theory, as he abundantly shows, 
is consistent, and the only one consistent, not only with his 
great fundamental prmciple of association, but with the facts 
reached in the history of every civilized nation. He also 
holds that the value of land depends upon the same principle 
as the value of any thing else, namely, the labor which has 
been expended upon it For, as he shows, there is no land 
that has a value which exceeds that of the labor that has 
been bestowed either upon it or upon something to which it 
is closely related. 

Taxation is the compensation paid to the government for 
its protection. Government is simply the agent of society, 
and those w^ho are the individual conatituents of this agency 
are entitled to a share of the product proportionate to the 
amount and quality of the labor bestowed. Not only all 
officers but all employes of every kind, such as labor in the 
construction of buildings for government, and other conven- 
iences, are also included in this category. 

CONSIJMPTIO:^. 

It hns been evident from what has been said all along that 
consumption is implied in production. All material is in 
general destroyed in entering into new forms of wealth. 
Thus leather must be destroyed in order to the production 
of shoes. Flour must disappear in the manufacture of bread, 
and wheat in the making of flour. Every kind of implement, 
or machine, or building, is consumed by use. Some of this 
consumption is immediate and by a smgle use ; other con- 
sumption is gradual. The food that we eat and the fuel 
that w^e burn are examples of the former ; tools, buildings, 
bridges, and nqneducts, are examples of the latter. Some of 



POLITICAL ECONOMY. 19 

this is accomplished in a few months or years ; some is pro- 
tracted througli centuries. 

Consumption is either productive or unproductive. The 
former is when the material appears in new form and with 
a higher value, as cloth made into garments, iron made into 
hardware and cutlery, food converted into muscle and sinew 
for the laboring man. Unproductive consumption occurs 
when gratification of desire is the sole object sought and 
achieved, as where one eats or drinks simply for the gratifi- 
cation of the palate, and without reference to restoring the 
waste of nature or the nourishment of the system. 

The general law of economical consumption is that only 
so much and such a quality of the commodity should be con- 
sumed as is necessary to effect the purpose designed, whether 
that be further production or individual gratification. The 
same principles hold good in public consumption as in private, 
though there they are vastly more likely to be neglected. 



RELATION OF POLITICAL ECONOMY TO CHRISTIAN ETHICS. 

This relationship ought to be very intimate mid very obvious. Indeed, we 
may expect that where a perfect civilization appears, embodying perfectly 
developed systems of economy and religion, they will be in such harmony 
as to form parts of one system. When men come to tliis, then it will be 
seen that ''All things whatsoever ye would that men should do to you, do 
ye even so to them." is a better rule of political economy than any ever 
devised by the aci or study of man. The book of Proverbs contains in 
wondrous combination the philosophy of both economy and ethics, and in- 
dicates as it is indicated nowhere else this coincidence. The genuine and 
divine Wisdom is extolled because she can say of herself, " By me kings 
reign, and princes decree justice." "Riches and honor are with me; yea, 
durable riches and righteousness. My fruit is better than gold, yea, than 
fine gold; and ray revenue tlian choice silver. I lead m the way of right- 
eousness, in the midst of the paths of judgment: that I may cause those 
that love me to inherit substance; and I will fill their treasures." Even 
public spirit and benovolence are declared economical — and this the science 
itself has laught us. For ''■ there is that scattereth, and yet increaseth;'and 
there is that withholdeth more than is meet, but it tendeth to poverty." 



[thought outline to help the memory.] 

Define "Social Science;" "Political Economy;" "Wealth?" "Value." 
Chief element in value? What is "labor?" "Utility?" "CapitaH" 
Two elements in " Sacrifice ? " Mr. Carey's statement? 

" The proper subject of Political Economy ? " The derivation of word " Econ- 
omy?" The" body politic? " Necessity of association? Other questions ? 

Define Production. Alaterials ? Forces ? Three applications of labor to pro- 
duction— Transm., Transf, Transp. Nine classes of " indirect labor ? " 
Forms in which capital exists? Antagonism between capital and labor ? 
Conditions of the highest production ? 

Define Exchange. Three things implied ? Distinction between " conmierce" 
and "traded' An " instruuient" of exchange? Eight characteristics? 
" Free trade and protection ? " 

Define Distnbution. Five iujpoitant subjects : W, P. I. R. T. 

Define Consumption. Two kinds ? General law of Economical Consumption ? 



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